In our earlier piece on the "The Market Schwerpunkt: Gold vs. Bonds" I discussed the use of relative value charts to analyze markets and guide positioning. Here we expand the roster.
1)Which intervals are you using in tradingview when checking relative value charts? day?week?month? does it matter?
2)You mention: There are also big relative swings between industries, which can be hard to track if we do not take out the market cycle effects of changes in sentiment. Do we take out these effects simply by using the relative value ratio?
Trading View automatically chooses the interval and I go with that. You can change it manually, but I forget how. The interval choice will not affect the relative value over the interval because it compounds. That is the key idea to understand. The start and end date determine the percentage change on RV, but not the choice of currency or interval. You do need to use *the same currency* for both, which is why I often use US traded ETFS when doing intermarket analysis. On 2), yes the reason to look at RV is that you do take out the "go to one" correlation effect of market crashes. You can then see the impulse residual of the crash. Some RV trends change around these events e.g. oil proudcers versus gold miners right now, and gold versus gold miners. Gold is the "cash", gold mining is the "business" and diesel is the "labor". Remember that and you will not miss the opportunity to come.
Great piece. Is a book coming??!!
A couple of questions:
1)Which intervals are you using in tradingview when checking relative value charts? day?week?month? does it matter?
2)You mention: There are also big relative swings between industries, which can be hard to track if we do not take out the market cycle effects of changes in sentiment. Do we take out these effects simply by using the relative value ratio?
Trading View automatically chooses the interval and I go with that. You can change it manually, but I forget how. The interval choice will not affect the relative value over the interval because it compounds. That is the key idea to understand. The start and end date determine the percentage change on RV, but not the choice of currency or interval. You do need to use *the same currency* for both, which is why I often use US traded ETFS when doing intermarket analysis. On 2), yes the reason to look at RV is that you do take out the "go to one" correlation effect of market crashes. You can then see the impulse residual of the crash. Some RV trends change around these events e.g. oil proudcers versus gold miners right now, and gold versus gold miners. Gold is the "cash", gold mining is the "business" and diesel is the "labor". Remember that and you will not miss the opportunity to come.